STEINHOFF International advanced more than 6% on the Johannesburg Stock Exchange on Tuesday — touching levels last seen in early July as shareholders cheered the company’s latest move to buy Africa’s largest retail chain, Pepkor Holdings.
The diversified retailer said it would acquire a 92.3% majority stake in Pepkor from investment vehicles controlled by retail billionaire Christo Wiese for R62.8bn to be settled in cash and shares.
Pepkor management will retain minority interests in the company.
Founded in 1965‚ Pepkor manages a portfolio of retail chains operating in 16 countries across Africa, Australia and East Asia.
The deal is expected to strengthen Steinhoff’s position in the discount retail market, with the combined entity set to boost its sales by between R39bn and R156bn.
Momentum Asset Management’s Wayne McCurrie said the surge in Steinhoff’s share price to R59.38 — its best intraday level in almost five months — was evidence that shareholders thought the company got Pepkor, which operates the Pep and Ackerman stores in SA, at a good price.
Steinhoff was a few trades away from hitting its record high of R60.03 reached on July 2.
On the other side of the spectrum, the 20% plunge in Brait’s share price, one of the investment firms Steinhoff will buy its Pepkor shares from, signalled shareholders expected more from the deal.
Brait will sell its 37.06% in Pepkor for R26.4bn.
“The market thought that Pepkor in Brait was worth more than what Steinhoff is paying for it,” Mr McCurrie said, referencing Brait’s market value, which had dropped by about R7bn from Monday’s close.
Pepkor was Brait’s largest asset, making up about R12bn of the investment firm’s R18bn portfolio as at September 2014. Brait’s other interests include Premier foods and Iceland foods.
At 2.44pm Steinhoff shares had soared 5.56% to R59.08 — valuing the retailer at R148.3bn.
Brait was off its intraday low of R67.05 — its weakest level since October 20 — and traded at R73.50, which was 17.12% lower than Monday’s close.
According to MoneyWeb, this deal is the third largest acquisition in South Africa’s business history.
Source: BD Live